Scandal-Plagued McKinsey Ousts Leader

Managing partner Kevin Sneader is out at the elite consulting firm. Photo: Samir Hussein/Getty Images for The Business of

“Let me begin with one word,” Kevin Sneader said in a speech in 2018, shortly after he took leadership of the consulting firm McKinsey & Company. “Sorry.”

The apology, it seems, was not accepted.

Today, the Financial Times reports that Sneader has been ousted as the firm’s “global managing partner,” a title that the firm bestows — in typically idiosyncratic fashion — via an internal election that takes place once every three years. Although there are term limits, it is rare for an incumbent to lose reelection. Therefore, Sneader’s defeat came as a repudiation, although not a totally shocking one, given the onslaught of negative publicity the firm has had to contend with during his tenure.

To start with, there was a scandal involving the firm’s work for the South African state power monopoly, including contractual relationships with politically connected individuals that a parliamentary inquiry suggested could “constitute criminal conduct.” That was the immediate cause of Sneader’s “sorry” speech. Before long, he found himself apologizing for other conduct, much of it involving work done prior to his tenure — a globe-spanning litany of embarrassments.

There was the work McKinsey performed in assisting ICE as it implemented the Trump administration’s retributive immigration-enforcement policies. In an email to employees, Sneader denied that McKinsey was deeply involved, but promised that the firm would “not, under any circumstances, engage in work, anywhere in the world, that advances or assists policies that are at odds with our values.” (An investigation by the Times and ProPublica later found that McKinsey’s expert analysis was instrumental in carrying out those policies.) There were lawsuits over alleged conflicts of interest in its lucrative bankruptcy consulting practice and investigations by the Times and other publications into its secretive $12 billion internal hedge fund. Looking beyond the United States, there were demoralizing disclosures about the reputation-conscious firm’s alleged relationships with corrupt oligarchs, brutal autocrats, and the Chinese government.

Finally, there was the coup de grâce: a scandal over the advice the firm gave the drug company Purdue Pharma on how to “turbocharge” sales of its opioid Oxycontin, even after it was clear the drug was causing addiction and overdoses. McKinsey recently paid $573 million to settle lawsuits brought by state attorneys general. The firm did not admit legal wrongdoing, but Sneader again apologized, issuing a statement saying the firm “did not adequately acknowledge the epidemic unfolding in our communities or the terrible impact of opioid abuse.” Still, many former McKinsey consultants — a powerful network that includes many top corporate executives, government officials, and current and potential McKinsey clients — recoiled in horror.

“As a McKinsey alumnus, my reaction was simply: ‘Dear God!’” the best-selling management guru Tom Peters wrote in a recent Financial Times column. “My decades of pride in the firm evaporated as I read of the settlement. In fact, I asked a colleague, in earnest: ‘Should I remove McKinsey from my CV?’”

McKinsey, a company that thrives on its prestige and its ability to recruit the sharpest young minds, cannot afford to have its name become disreputable. The firm prides itself on its scientific approach to management, but as an institution, it is sometimes compared to a religion. A History of the Firm, a 500-page volume McKinsey privately published — and designated as “confidential information” in an opening disclaimer — likens its organizational character to the Jesuit Order of the Catholic Church. This is laying it on a bit thick. Still, McKinsey does have a doctrine — the legendary “McKinsey Way” — and its own rituals. One of them is the firm’s arcane system for electing a global managing partner, which has been likened to the process of selecting of a pope.

Every three years, firm’s senior partners — there are currently 650 — nominate candidates for the post. From a list of ten semifinalists, the senior partners then use a ranked-choice voting process to whittle the election down to two, with the winner selected in a third round by a simple majority. After emerging as the winner in 2018, Sneader promised to govern as a reformer, conceding that the firm had “historically been less than transparent.” He embarked on what, by McKinsey’s standards, amounted to a policy of perestroika, doing many interviews and relaxing the firm’s ethic of strict secrecy a little. (Several of the firm’s partners talked to me for an article about its controversial work for a federal board that was basically running Puerto Rico.)

Sneader’s modest attempts at openness did little to mollify the firm’s critics, who say McKinsey embodies everything that it is wrong with globalization and capitalism. And it does not seem to have won Sneader many allies internally, either. Unlike his previous five predecessors, he was denied a second term, and in fact did not even advance to the last stage of the voting process. (The finalists are Sven Smit, an Amsterdam-based partner who heads the McKinsey Global Institute, the firm’s internal think tank, and Bob Sternfels, a partner from the San Francisco office who oversees the firm’s embattled bankruptcy arm and who lost out to Sneader in the last round in 2018.) In response to the news of Sneader’s elimination, which was broken by the Financial Times, the firm released a characteristically terse statement, saying only that the election is “now underway and we will announce the result after the election concludes.” The FT reported that insiders described the surprise result as “a rejection of Sneader’s efforts to reform the private firm by tightening scrutiny of which clients its partners took on.”

In other words, the era of relative openness — and apologies — may be closing at McKinsey.

Scandal-Plagued McKinsey Ousts Leader